Inflation fail falters dollar

The dollar is losing against its peers Thursday morning after consumer price data for April increased less than expected and U.S. Treasury yields took a dive. Earlier, the Bank of England held rates steady and the pound took a tumble.

U.S. CPI misses the mark

The dollar is giving back some of its recent gains after inflation data missed estimates. The greenback’s recent strength has been helped by rising U.S. Treasury yields, but the 10-year yield fell below 3% pushing the dollar’s decline.

Headline CPI for April increased 0.2% month over month compared to a 0.3% estimate. The year-over-year measurement met expectations of 2.5% growth. Core CPI, which is more closely watched by the Fed, grew 2.1% year over year compared to 2.2% expected. Month over month, core CPI rose 0.1% instead of the 0.2% expected.

With inflation slightly below market expectations, it won’t impact the Fed’s gradual tightening plan, but it may put into question four rate hikes this year. The FOMC’s next meeting is June 12-13.

EUR/USD was rising above 1.192 after the data came out. The pair was trading up around 1.188 ahead of the release.

The pound attempted a recovery against the dollar, but the BoE event earlier still weighed on the currency. GBP/USD was trading around 1.353 at 9 a.m. EST.

USD/JPY was inching back toward 110 earlier Thursday and was trading around 109.6 before the inflation data release. The pair then fell below 109.4.

Bank of England holds rates

Members of the Bank of England’s Monetary Policy Committee had a decision to make: either ignore the slowdown in the country’s economic growth or ignore the rising inflation currently above their 2% target. They chose the latter, announcing Thursday to hold interest rates steady.

In a vote of 7-2, the MPC said interest rates would remain at 0.5% in line with the vote at the previous meeting. In March, a May rate hike was almost a sure thing, but key economic data releases since then caused the bank to pause and look to future meetings as the time to act.

Bank President Mark Carney said that underlying growth is still strong and sees the recent slowdown as only temporary. The bank said it would continue to raise rates gradually in a limited fashion.

BoE revised its 2018 GDP estimate from 1.8% to 1.4%.

GBP/USD fell from near 1.36 to below the 1.35 mark after the news. The pair was trading around 1.355 before the U.S. inflation release.

Win some, lose some?

President Trump welcomed home three American hostages who were being held in North Korea. After meeting with North Korea leader Kim Jong Un, Secretary of State Mike Pompeo returned with the three men around 2 a.m. EST at Andrews Air Force Base.

The President is expected to meet with Kim in the next few weeks.

In other international relations news, President Trump’s withdrawal of the U.S. from the Iran deal is causing oil prices to rise as fighting in the region increases. Israel struck Iran’s military in Syria in response to rocket fire. West Texas Intermediate hit $71.5 per barrel Thursday morning.